Trading Volume In Forex, a must needed guide
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Irrelevant of the answer, everyone knows how important volume is the analysis of stocks and futures. Volume, open interest and price action are the key components in trading decisions. Did you notice that volume does not have the same importance as in stocks and futures? Or, in fact, did you ever use the volume on your Forex chart? How is volume measured in the Forex market? Does the Forex market use volume levels as well?
We are going to discuss all of these questions and more. Please write price volume trading strategy your own experiences in the comment section down below. It is well worth your price volume trading strategy as you will price volume trading strategy able to identify how advanced your trading price volume trading strategy and how you can move on to the next level!
The Forex market is a decentralized market, which means that there is no formula for volume or method of keeping track of the number of contract and contract sizes, such as in the stock market. The Forex market measures volume by counting the tick movements.
The logic behind this is straightforward:. It is the equivalent of focusing on the next result instead of analyzing the process. The volume measurement in the Forex market is looking at how much price moves within a certain period and it does not care how many or few buying and selling transactions are in fact needed to make that price move 1 tick. All it knows is how many ticks it moved, regardless of the fact if trades were involved or 10, Price action is always our primary focus and we should never forget that!!
Write it down on a piece of paper, if need be, with a thick yellow mark: Almost everything is derived from price and calculated based on price, so using price action as the primary source for decisions is only logical. Using volume to define price volume trading strategy decisions makes sense if it is used as a confirmation. Here are its primary advantages:.
Volume can confirm the trend direction price volume trading strategy traders want to see increased volume in the direction of the trend and decreased levels of volume when the currency pair is correcting in the opposite direction of the trend. Read here more information how to price volume trading strategy divergence. During a consolidation, volume measurements typically are low. If volume picks up upon the break of that consolidation pattern wedge, triangle, flag, etcthen the volume is confirming a higher chance of a sustainable breakout.
Read more on trading breakouts here. In previous articles of mine, we have discussed how to interpret the above-mentioned elements. Please go to these price volume trading strategy for detailed and in-depth information:. Accumulation is a phase when buyers are controlling the market.
If the volume is increased when the market is correcting in a downtrend, then this typically means that more buyers are stepping into the market and a reversal could occur.
Usually, these are confirmed when:. Distribution is a phase when sellers are controlling the market. If the volume is increased when the market is correcting in an uptrend, then this typically means that more sellers are stepping into the market and a reversal could occur. It is calculated as follows:. If the indicator is falling then it indicates distribution selling of the currency.
If the indicator is rising then it indicates accumulation buying of the currency. The most logical place to start is the volume indicator. This tool calculates the number of ticks which a currency moves up and down. It is often used in other calculations as well. For instance, the AD methodology mentioned in the paragraph above includes volume as part of its basic parameters.
The tool was developed by Joe Granville and is used to detect whether the volume is bearish or bullish oriented. OBV marks the particular volume of the day as a bearish or bullish depending whether the day price volume trading strategy been bearish and bullish.
The total then indicates the overall sentiment of price volume trading strategy market. The money flow index shows the money flow and is calculated in a few steps. I recommend going to this link to read the steps yourself.
The MFI is calculated by:. The formula is very simple, yet provides price volume trading strategy interpretations in combination with volume. There are 4 different combinations based on MFI and volume. The color codes have the following meaning:. Green indicates a strong price volume trading strategy continuation mode. Brown indicates a potential area of the trend ending. Blue occurs in environments when a market spikes into 1 direction, often causing confusion about the trend direction.
Pink indicates the beginning price volume trading strategy a trend continuation or reversal. Remember, the volume is important for the analysis of stocks and futures. Please let us know your opinion down below! The logic behind this is straightforward: Here are its primary advantages: For an uptrend, this means increased volume when the price is moving up and decreased volume when the price is moving down.
For a downtrend, this means increased volume when the price is moving down and decreased volume when the price is moving up. Please go to these links for detailed and in-depth information: Usually, these are confirmed when: It is calculated as follows: The MFI is calculated by: The color codes have price volume trading strategy following meaning: These are the volume tools you can use in the Forex market. Thanks for reading and for sharing the article! Have a great weekend and Good Trading!
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